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By this time, it was apparent that whether Bethlehem could make its increase stick depended upon the action of U.S. Steel, which produces 36% of the nation's structurals. In 1962 it was U.S. Steel Chairman Roger Blough who had led the industry's effort to raise prices—and was forced into a humiliating backdown by the Kennedy Administration. Now Blough warily tested the temperature in the capital before taking action.
Flying to Washington, Blough talked first with Treasury Secretary Henry Fowler, then with Defense Secretary Robert McNamara. Volatile Viet Nam, a swelling federal budget and a sprinting economy, the two Secretaries argued, meant that this was no time for price increases in big industries. They insisted that they did not fear a $5 raise on structural steel in and of itself; what did worry them was the psychological effect that such an increase might have on labor, and the chance that it might set off a chain reaction of other price hikes.
Blough listened, flew back to Pittsburgh—and next day announced that U.S. Steel would raise its structural steel price by $2.75 a ton, and at the same time cut by $9 a ton the price of cold-rolled sheets produced at its Pittsburg, Calif., plant. As it happened, the rollback would merely bring the California product into line with the price of cold-rolled sheet throughout the rest of the country and would help U.S. Steel meet increasing Japanese competition on the West Coast.
The Grumbles. Everyone involved denied that there had been any sort of a "deal" between U.S. Steel and U.S. Administration, but within minutes after U.S. Steel's announcement, Gardner Ackley raised his voice in praise. He pointed out that the $2.75 increase on structurals, coupled with the California cutback on cold-rolled sheets, would raise company revenues by "less than 0.1%"—which he called "inconsequential" as far as inflation was concerned. As for President Johnson, he swiftly let it be known that he was "pleased."
Other structural producers had no choice but to fall in step with U.S. Steel —not without some grumbling. "It is interesting that only $2.25 a ton on 7% of steel output is the difference between inflation and noninflation in this country," snapped Inland Vice President William Caples. Even amenable Roger Blough, noting that steel prices have remained nearly level since 1958 while the industry's labor costs have climbed by more than 20%, offered the tart comment that steel prices "cause inflation like wet sidewalks cause rain." The real reasons for inflation, he said, "are higher wages and excessive credit." Michigan's Republican Governor George Romney, former head of American Motors, criticized the Administration for standing by while wages go up, then "clubbing companies into the ground" when they try to put through compensatory price increases. The U.S. Chamber of Commerce called business "the scapegoat for inflationary pressures," labeled Administration pressures on steel as "blackmail."